May

IMPACT OF RICE PROCESSING VILLAGES ON HOUSE HOLD

INCOME OF RURAL FARMERS IN ANURADHAPURA DISTRICT

W.C Gamawelagedara1, Y.M Wickramasinghe1 and C.A.K Dissanayake2

ABSTRACT

Rice processing village is a concept introduced by the Institute of Post-Harvest

Technology in 2005 to promote quality rice production as a cottage industry with the
assistance of a number of state and non-state sector organizations. An evaluation study
conducted in 2009 revealed that, of the beneficiaries, 75% are females who were
underemployed before. One family has processed an average quantity of 14,496Kg of paddy
and has earned an average profit of Rs. 121,203 per annum. Profit earned per Kg of paddy
was Rs. 9.02 and Rs. 11.83 including and excluding family labor respectively through
processing. This is a financially viable and labor intensive enterprise that is appropriate for
rural villagers. Due to the profitability, this enterprise has grown at an average annual rate
of 172% during past five years.Financial problems, lack of storage and high prices of paddy
unavailability of paddy during the off season are some of the common problems faced by
the producers while marketing was a problem in interior locations. Credit programmes,
infrastructure development, supplying paddy at a stable price throughout the year and
forming rice producers associations are some areas where state intervention is required.

Keyword: Rice processing, Rice marketing, Rural development, Producer associations.

INTRODUCTION

Paddy sector in Sri Lanka
Paddy production in Sri Lanka was 3.82
million metric tons in 2008 and
contribution of the agriculture sector to the
gross domestic product (GDP) was 12.1%
in the same year (Central Bank of Sri
Lanka, 2009). Paddy farming is a direct
source of income for the majority of the
rural farmers as well as an indirect source
of income for the providers of support
services, paddy millers and traders of
paddy and rice. Paddy is a crop grown
almost in all parts of the country and
districts of Anuradhapura, Pollonnaruwa,
Ampara and Kurunegala collectively
account for nearly 50% of the annual
production of paddy (HARTI, 2008).
The paddy sector receives the highest
priority in the development agenda
1
Department of Agricultural systems, Faculty of Agriculture, Rajarata University of Sri Lanka,
Puliyankulama ,Anuradapura, Sri Lanka
2
Institute of Post harvest technology, Jayanthimawatha, Anuradapura, Sri lanka
because paddy is the staple food in Sri
Lanka. Over time, the paddy sector has
been transformed rapidly from the
traditional to commercial status due to the
adoption to new methods of cultivation,
and high yielding varieties, and extensive
investment in irrigation, and settlement
and other infrastructural developments
undertaken at different periods of time
since independence (HARTI, 2008). The
annual paddy production satisfies around
95 percent of the domestic requirement
and per capita consumption of rice
fluctuates around 100Kg per year
depending on the prices of rice, bread and
wheat flour (Central Bank of Sri Lanka,
2009).
Anuradhapura is the largest district of the
country and more than 90% of the people
of the district are living in rural areas
 The Journal of Agricultural Sciences, 2011, vol .6, no2
(Central Bank of Sri Lanka, 2007).
According to available statistics, nearly
19-23% of paddy produced in Sri Lanka is
from two major district, Anuradhapura and
Pollonnaruwa (Department of Census and
Profitability in paddy production
Table 01: Costs and returns of paddy per acre
Description
Fertilizer (With subsidy)
Seed paddy
Labor for land preparation
Tractor charger for land preparation
Agro chemicals
Harvesting, threshing with machine
Post harvest handling
Total Cost
Gross income
Net income
Source: http//villagerinsrilanka, 2008
*Without Subsidy it is Rs. 16,500.00
Paddy fertilizer subsidy has reduced the
per acre cost of fertilizer by Rs.15, 000
and is equal to reduction in cost of
production of a Kg of paddy by Rs.7.50.
Assuming that the per acre yield of paddy
is 100 bushels, cost of production and
yield were the same in both Yala and
Maha and it both seasons were successful,
the maximum profit a farmer could earn
was Rs 71,200 from one acre of paddy
during the cropping year. This equals to a
monthly profit of Rs.5933 in the dry zone.
The majority of the rural farmers own
paddy fields of less than one acre in extent
and the average family size is around four
members. When all these factors are
considered, it is clear that paddy farming is
becoming financially less attractive despite
the government subsidies on credit,
fertilizer, irrigation water and prices plus
the heavy social investment in research
and development and technology
dissemination. Under these circumstances,
value addition to paddy at the village level
Statistics, 2008) and the annual paddy
production in the area also has increased
over time.
Cost/Returns (Rs)
1,500.00*
2,900.00
4,000.00
6,000.00
3,000.00
7,000.00
3,000.00
27,400.00
63,000.00
35,600.00
as a cottage industry is an act with
paramount importance.
Paddy milling industry
There were over 7,000 paddy mills in the
country in 1986 and of which the majority
was small scale mills (Palipane, 2003). At
present this sector is dominated by the
private millers. Modern, semi modern
and custom are the different types of
paddy mills found in Sri Lanka. Custom
and commercial rice mills are the two
forms of mills available locally and
custom mills, mills rice mainly for home
consumption using the conventional
technology and commercial type mills are
used by the large scale millers.
Nearly 70% of rice consumed in Sri Lanka
is parboiled rice and advantages in
parboiling are the higher milling recovery,
higher nutritional value and low
percentage of broken grains. The present
parboiling techniques adopted by the
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W.C Gamawelagedara, Y.M Wickramasinghe and C.A.K Dissanayake

millers affects the quality of rice adversely
and thus it should be upgraded (HARTI,
2008).
During the harvesting seasons millers face
problems due to low quality of paddy, high
transport cost, storage losses and lack of
labor and capital. Low quality of paddy is
a serious problem during rainy season
because farmers sell wet paddy threshed
using harvesters.With the increase in
awareness, consumer has become more
quality conscious. as a result, branding of
rice has become popular in the local rice
market. In order to satisfy this requirement
the Institute of Post-Harvest Technology
(IPHT) has introduced some guidelines to
millers (Palipane, 2003).

Paddy
farmers

Bank/financial Village Other Gvt.

institution Organization

Rice Processing Rice Millers

Families

Institute of Post
Harvest Technology
Source: Institute of Post Harvest Technology
Figure 01: Structure of a Rice Processing Village

MATERIALS AND METHODS

Sampling

A convenient sample of 04 divisional was conducted to collect information from

secretariat (DS) areas (Rajanganaya, sampled farmers.
Kahatagasdigiliya, Kekirawa and a. Growth rate of the enterprise was
Nuwaragampalatha-central) were selected measured in the following manner
based on the number of RPVs in operation. to assess whether the RPV
A sample of five villages from each DS programme is a success.
division was selected at random and a
sample of five farm families was selected Annual growth rate (Xi) was calculated
from each village using the lists of first and the overall growth rate (GR) was
participants maintained by the IPHT. Thus calculated thereafter.
the total sample was 100. A field survey
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 The Journal of Agricultural Sciences, 2011, vol .6, no2

Xi = QEi-QBi X 100
QBi ..01

GR = (X1 +X2 +X3 +X5 +X6 )1/5 ..02

Where;
Xi = Growth rate (%) of the ith year
QBi = Quantity of rice produced at the beginning of the ith year (Kg)
QEi = Quantity of rice produced at the end of the ith year (Kg)
b. Annual profit of the enterprise was calculated as given below
GR was calculated as the geometric mean of annual growth rates
i = Yi -TCi ...03
Yi = QRi.PRi04
TCi = CRPi + Di..05
CRPi= CPi + CMi + CTRi + CPKi + COi..06
CPi = Qpi. PPi .07
CMi = CPi. Ci08
CTRi= Li. CTRi09
Where:
= Profit (Rs) in year i
Yi = Gross revenue of year i (Rs)
TCi= Total cost incurred in rice processing in ith year (Rs)
QRi = Total quantity of rice produced in ith year (Kg)
PRi = Average retail price of rice in ith year (Rs/Kg)
CRPi = Material cost of processing rice in ith year (Rs)
Di = Depreciation allowance of capital items in the ith year (Rs)
CPi = Cost incurred on paddy purchasing in ith year (Rs)
CMi = cost of paddy milling in ith year (Rs)
CTRi = cost of transport in ith year(Rs)
CPKi= cost of packaging of the ith year (Rs)
COi = other cost incurred in the ith year (Rs)
Qpi = quantity of paddy purchased in ith year (Rs)
th
PPi = average retail price of paddy in i year (Rs/Kg)
Ci = average cost of milling a Kg of paddy in ith year (Rs)
Li = total distance travelled in ith year (Km)
CTRi= per Kg cost of transport incurred in ith year (Rs)
Once the nominal profits were calculated those values were corrected for inflation as
explained below.
Ri = Ni
CPIi
Where:
Ri = Profit of the year i in real terms (Rs)
Ni = Profit of the year i in nominal terms (Rs)
CPIi = consumer price index of year i.

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W.C Gamawelagedara, Y.M Wickramasinghe and C.A.K Dissanayake

RESULTS AND DISCUSSION

Nearly of the respondents are females
and 65% of them are between 36 and 50
years of age. Full time farmers account for
76% of the sample. This information
uncovers the fact that small scale rice
processing is an economic venture that is
popular among rural women. Therefore,
this activity could be promoted as a mean
and of reducing unemployment among
rural women as well as evaluating the
social status of this marginalized group of
people of the rural community.
As farmers have to purchase a set of
utensils to parboil paddy. They need
outside financial assistance at the initial
stage. Study revealed that 85% of the
participants have received subsidies.
Farmers who did not receive subsidies had
obtained credit. Based on the findings it is
realistic to state that channeling of capital
to farmers either through government
sector or non-government sector
organizations would catalyze the rate of
farmer adoption. Therefore that factor
should receive due attention when this
programme is introduced to a new area.
Cost analysis
Costs of paddy, milling and transport have
accounted for 93, 6 and 1 percent of the
total operational cost respectively when
the cost of family labor was excluded. The
average amounts of paddy processed by a
village and a family within a period of one
year are 76,908 and 14,496 Kg
respectively. Farmers have faced
difficulties due to lack of money to
purchase sufficient quantities of paddy,
dearth of storage facilities and highly
volatile paddy prices. This information
again justifies the requirement of a credit
programme to support farmers. At the
same time, it would be beneficial to supply
paddy at a stable price throughout the year
through public sector institutions such as
Paddy Marketing Board and Multi-
Purpose Co-operative Societies (MPCs).

Table 02: per family Cost of processing paddy per family (excluding family labor and
depreciation)

Cost item Cost (Rs/year)

Milling cost 31,008.00

Cost of paddy 460,932.00

Other costs Transportation, packing, 5700.00

Loan payments
Total 497,640.00

Average quantity of paddy milled by a
family within a period of one year is
14,496 Kg. Annual average cost incurred
by a family in rice production is Rs.
497,640.00 and the average cost of milling
a Kg of paddy is Rs 32.35. Average total
cost includes milling cost (Rs. 31,008.00)
cost of paddy (Rs. 460,932.00) and other
costs (Rs.5700.00) (Table 02). Average
amount of labor consumed within a month
is 46 man days. Out of the annual labor
requirement, 30% is male labor while the
balance is female labor. Daily wage rate of
a male is Rs. 700.00 while that of a female

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 The Journal of Agricultural Sciences, 2011, vol .6, no2
labor is Rs.600.00 and the total labor cost
incurred is Rs 28,812.0 per annum per
family. Females do not spend time
especially for this activity and they attend
to it while attending to their day to-day
Table 03: Profit earned by a family in paddy processing (Rs)
Description
Average selling price (Rs/Kg)
Average income (Rs/year)
Less:
Average total cost (Rs/year)
Description allowances (Rs/year)
Equals:
Profit excluding labor cost(Rs)
Profit per Kg including family labor (Rs)
Profit per Kg Excluding family labor
Results indicate that farmer earns an
average profit of Rs. 9.02 per Kg of paddy
including family labor and Rs.11.83
excluding family labor when it is
processed (Table 03). Therefore, this is a
practice that could increase family income.
Based on this information it is reasonable
to state that, this is a practice that is worth
introducing to other part and of the country
too.
Growth rate of the enterprise
During the period of last five years these
farmers have made an impressive progress.
The average growth rate of the enterprise
was 139.36, 277.29, 120.96, 272.15 and
117.84 percent respectively in year and
Through public sector institutions,
probably capital could be provided either
individually or collectively through Rice
Producers Associations. Unavailability of
sufficient amount of soaking tanks and
drying yard facilities also has constrained
the growth rate of the enterprise.
Rice Marketing
Majority of the farmers have sold rice by
themselves in small quantities as well as in
bulk. A group of farmers (9%) have sold
activities of the household. Therefore, this
could be seen as a mean and of increasing
the utility of under-utilized female labor in
rural communities.
Cost/Income
60.00
622,044.00
497,640.00
3201.00
121,203.00
9.02
11.83
one, two, three, four and five. The overall
growth rate is 171.85 percent. This
information indicates that farmer
acceptance of the activity is high and thus
they have expanded the scale of the
enterprise gradually overtime.
Problems encountered
Lack of capital, unavailability of storage
facilities and lack of marketing facilities
are the major constraints faced by the
farmers (Table 04). These constraints
could be lifted through a credit programme
and the provision of paddy and purchasing
of rice at stable prices.
rice in small quantities by themselves and
another 5% of them have sold through
retail outlets of the area. The balances 8%
of them have sold through the retail outlet
of the producers association.
According to the results, 70% of the
entrepreneurs have not experienced
problem in rice marketing, because the
quality of their product is high. Another
20% of them have suffered due to non
availability of a proper place to sell their
rice and they have sold to limited number
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W.C Gamawelagedara, Y.M Wickramasinghe and C.A.K Dissanayake

of customers of the area. This was reported balance 10% have faced problem due to
from Pallippothana, Kadurugaskada, lack of transportation (Figure 02).
Wahalkada, Parangiya Wadiya,
Kapugollewa villages, which are located
far away from the urban centers. The

Table 04: constraints faced by farmers

Constraints % reported
Problem regarding expansion
Capital 65
Capital and Marketing 20
Capital and storage 15
Problems regarding storage
Rodent damage 89
Lack of storage 9
capacity/rodent damage 2
other
Problems regarding marketing
No. Marketing problems 70
No. well oriented market 20
place 10
Transport problem

Rice marketing problems

10%
No.Marketing problem
20%
No.well oriented marketing

70%
Transport problem

Figure 02: Problems of rice marketing

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 The Journal of Agricultural Sciences, 2011, vol .6, no2

CONCLUSIONS Recommendations

Of the respondents 74% are women and
paddy cultivation is their main occupation.
In general, unavailability of credit and
storage facilities is the common problems
faced by the entrepreneurs. The RPV
programme is largely a labor incentive
one, and family labor can be utilized in
rice processing. The average amount of
paddy processed by a family within a
period of one year is 14,496Kg and
average use of labors is 46 man days. Cost
of labor accounts for Rs. 28,812.00 per
annum. Analysis revealed that additional
profit gained from a Kg of rice is Rs. 11.83
and a family has earned an additional
profit of Rs. 10,100.56 per month by
selling rice instead of paddy. Of the
average total cost (without imputed labor
cost) of the enterprise 92.59%, 6.26% and
1.15% respectively are on paddy, milling
and other expenses. Average growth rate
of the enterprise is 172% per annum. The
new technology has the ability to produce
good quality rice at reasonable cost that
benefits both consumers and the
processors.
Based on the results of the study the
following recommendations could be
made. This technology should be
disseminated to the other parts of the
country, especially to the post-conflict
areas such as North and East because these
are paddy producing areas where
economically handicapped are living.
Steps should be taken to provide credit on
time at reasonable interest rates. The
government should intervene to establish a
programme enabling these small scale
people to purchase paddy at a stable price
throughout the year. Launch a strong
awareness programme to make the general
public aware of the benefits and potentials
of the programme. Create regionalized
markets for rice and link producers with
large scale buyers such as Cargills and
Keels.Establish a national level
organization aggregating all these rice
processors scattered throughout the island
in order to increase the bargaining as well
as marketing power of produces because
this type of a state sponsored monopoly
would make the small scale producers
strong enough to compete with the giants
in the business.

REFERENCES
Central Bank of Sri Lanka (CBSL) 2007, Data profile North Central Province, 2006,
Regional Office of CBSL at Anuradhapura, CBSL.
Central Bank of Sri Lanka (2009).Annual report (2008), Colombo: Central Bank of Sri
Lanka.
Department of Census and Statistics (2008). Paddy statistics 2005-2008, maha and yala
Seasons, Department of Census of Statistics, Colombo, Sri Lanka.
Hector Kobbekaduwa Agrarian Research and Training Institute (2008).Viability of Rice
Processing at Household Level, Hector Kobbekaduwa Agrarian Research and
Training Institute, Colombo, Sri Lanka.
Institute of Post-harvest Technology (2008). Report on rice processing
village,(unpublished),Institute of Post harvest Technology, Anuradhapura, Sri Lanka.
Palipane, K.B.(2003). Milling and Quality Improvement in Rice in D.S de Z.
Abeysiriwardena, D.M.N Dissanayake and L. Nugaliyadde(eds) Rice congress 2000,
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